Explain McDonald's Pricing

[Philster]

Side note: McDee’s biggest ad push now is for Sweet Tea, which has a better margin than
soda.

[billfish678]

On the flip side. A year or two ago I got a big craving for some KFC fried chicken. I noticed that price per piece of chicken was pretty much a constant whether you got only a few pieces or twenty something. IIRC the prices for larger volumes were slightly cheaper but only slightly. And there were no obvious you’d be a fool to buy this when you can get that “sweet/WTF? spots” either.

[anson2995]

@cjepson

McDonald’s makes its money on fries and drinks. Everything else is basically loss leaders.

That (loss leaders) is absolutely not true. In an article about loss leaders at other fast food chains, the Wall Street Journal said the food and packaging cost for the $1 double cheeseburger was $0.45.

[Jophiel]

@Philster

Side note: McDee’s biggest ad push now is for Sweet Tea, which has a better margin than soda.

It’s also 99.97% ice versus the 94.25% ice they use for Coke.

I bet those foam cups cost more than the wax paper ones though.

[Jophiel]

@anson2995

That (loss leaders) is absolutely not true. In an article about loss leaders at other fast food chains, the Wall Street Journal said the food and packaging cost for the $1 double cheeseburger was $0.45.

The complete quote there was:

The McDonald’s Dollar Menu may be the best value in town, but some franchisees find the six-year-old promotion hard to stomach. While food and packaging costs just 45 cents for a double cheese burger, franchisees also have to pay for rent, labor and utilities. In total, a promotional price of just $1 leaves store operators with a measly 6 cents of profit, according to a franchisee in Florida. Of course the markup on fountain drinks and French fries is typically pretty high

So not a loss leader but they’re not making 55 cents off the burgers, either.

Edit: That 2009 article says “double cheeseburger” but not “Double Cheeseburger” so I don’t know if it was pre- or post- McDouble conversion.

[kayaker]

@obbn

And we used glass not disposable cups so we didn’t even have the cost of the cup to absorb.

So. . .you reused the glasses without washing them?

[Alan_Smithee]

@anson2995

That (loss leaders) is absolutely not true. In an article about loss leaders at other fast food chains, the Wall Street Journal said the food and packaging cost for the $1 double cheeseburger was $0.45.

According to your Wall Street Journal cite, when you factor in overhead costs, it works out to about 6 cents profit on a $1 double cheeseburger. That’s clearly going to vary by location, though. Plus, it’s going to increase volume, which might drive up overhead or drive away more profitable customers (or might attract more soda-and-fry buyers as well, like they hope). It’s almost impossible to account for all the factors involved, but it’s easy to imagine some stores taking a hit on that.

[chaoticbear]

@Joey_Tightlips

Bah, rookie mistake. The correct option was to get one McDouble and a McChicken sandwich for $2.00.

Indeed. (SFW content, possibly NSFW title for some reason. I hesitated before clicking but the filter didn’t protest)

[anson2995]

@Alan_Smithee

According to your Wall Street Journal cite, when you factor in overhead costs, it works out to about 6 cents profit on a $1 double cheeseburger.

Ok, but that figures overhead at about 50 cents per item, which you have to apply to soft drinks as well. The apples-to-apples comparison says that the profit margin is about 55% on the $1 burger and 90% on the soda (so says this other WSJ article). Clearly, neither is a loss leader.

[Balthisar]

@Philster

Side note: McDee’s biggest ad push now is for Sweet Tea, which has a better margin than soda.

You know what’s an even bigger margin? Normal tea, without sweetener. Ever since they introduced that crappy southern- and/or Ontario-style sweet tea, I can’t get a normal iced tea at my local (in Michigan) McDonald’s. Oh, they have it but it’s like pulling teeth getting them to serve it to me. :mad:

[Floater]

@obbn

I managed a resteraunt/bar back in my younger years …

I refuse to use the word restaurant in connection with McDonald’s.

[zagloba]

@Floater

I refuse to use the word restaurant in connection with McDonald’s.

He didn’t